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There could be further scrutiny placed on investment lending, the Reserve Bank has warned, after banks hurried to reclassify billions of dollars worth of home loans.

Speaking at the FINSIA Regulators Panel held in Sydney last week, RBA deputy govenor Philip Lowe scorned Australian lenders after $50 billion worth of mortgages were reclassified from owner-occupied loans to investment loans.

“Over the past six months there have been very large upward revisions to the value of investor loans outstanding, with offsetting downward revisions to owner-occupier loans,” Dr Lowe said.

“The cumulative effect of the upward revisions has been to increase the stock of investor credit outstanding by around $50 billion, or 10%.

“It is disappointing that some lenders' internal systems have not been up to the task of reporting accurate data on the split between investor and owner-occupied housing loans.”

According to Lowe, the reclassifications justify the recent lending crackdown and could lead to increased regulator scrutiny placed on investment lending in the future.

“These various data problems have reinforced our view that the supervisory focus on investor lending has been entirely appropriate,” he said.

“This issue was discussed at the most recent meeting of the Council of Financial Regulators, with Council members considering what steps could be taken to improve the quality of data.

“Among other things, it has been decided that APRA, the RBA and the Australian Bureau of Statistics will, next year, undertake a thorough review of the data collected from authorised deposit-taking institutions regarding their domestic books.”

COMMENTS

by Maria Rigoni10/11/2015 9:50:05 AM

Maybe the banks are sorting out their books because they can sting their customers by charging higher interest rates to investors. Remember back in the late 80's when interest rates on home loans were 17% and investor loans were 23%. Competition lowered the margin now the margin is spreading wider.